Sri Lanka’s state-run Ceylon Petroleum Corporation (CPC) is to be re-organized aimed at making it a more profit-making and vibrant venture eliminating irregularities, waste and massive financial losses, Minister of Petroleum Resources Susil Premjayantha said. He told the Business Times that the management of the CPC will be spearheaded by a full-time Chief Executive Officer under the proposed re-organizing structure.
At the moment, the Chairman of the CPC acts the Managing Director making him responsible for almost all operations of the corporation. This was not a healthy situation, and thus action is being been taken to amend the Ceylon Petroleum Corporation Act (No. 28 of 1961).
Mr. Premajayantha said that necessary amendments have been prepared and is Legal Draftsmen. He noted that this was not connected in any way to IMF conditions to get the final tranche of US$426.8 million of the US$2.6 billion released to Sri Lanka. He revealed that the CPC could be operated as a viable, profit making institution, if the massive amount of debt amounting Rs.63.6 billion could be recovered from government institutions, private power plants and airlines. Minister Premjayantha added that all state institutions have been given one month to settle their dues
The government has promised the IMF that the CPC and the Ceylon Electricity Board would be re-structured soon, an assurance that was given earlier too. The letter sent to the IMF recently giving consent for this has been signed by the Deputy Minister of Finance Geethanjaya Gunawardene, according to officially, released documents.
According to financial regulations governing state corporations, the CPC has to contribute 30% of its profits or 15% of equity, whichever is higher, to the Consolidated Fund. But this was not done by the CPC as it was not making profits.
These losses are affecting the Consolidated Fund. From time to time the Treasury is compelled to re-capitalise the state banks (including through the issuing of bonds). In addition, the substantial guarantees, which have been issued to state-owned enterprises, are contingency liabilities which impact on the Government’s overall creditworthiness and therefore, on the assessments made by rating agencies which are becoming an increasingly important determinant of the country’s prospects, official sources said adding that under this set there was an urgent need to restructure CPC and Ceylon Electricity Board, which were major, loss-making state entities.